Life insurance is purchased to supplement the future financial security of the beneficiary. There are two types available: whole life and term life. Recognizing the differences allows the purchaser to achieve better insurance planning.
Term life policies are clearly defined, and thus easier for DIY insurance planning. A definite payment amount guarantees that a specified amount will be paid to the beneficiaries. These policies typically have a 20-to-30-year term with affordable premiums. Some companies include predetermined increases in payments at specific intervals throughout the life of the policy. Once the term of the policy is exhausted, a renewal is required, and the costs increase substantially due to age and physical conditions.
Whole life insurance policies can be difficult to understand at first because there are actually two components: death benefits and a savings account. When the policy is first purchased, a death benefit amount is selected—the same as for a term policy. However, as the premiums are paid, the money is put in a savings account. This account accrues interest paid by the insurance company. As the amount of money in the savings account increases, the death benefit decreases, so that the total amount of money associated with the policy remains constant. Eventually, the total amount of money that will be paid out to the beneficiaries is the purchaser's own money plus the interest. So while premiums are higher for whole life insurance than term life insurance, the money is guaranteed for the whole lifespan, plus at least the minimum amount of interest the company gives per year. Depending on the success and qualifications of the company that provides the insurance, the policy purchaser may receive higher or lower dividends. Well-established companies usually give the best returns on investments.
Insurance planning emboldens people to consider all the factors that affect the actual return on premium investment. For those able to pay higher premiums now, a whole life insurance policy may be worth the investment. The best advice is to request a quote for comparable plans. Both term and whole life policies offer tax-free income benefits and guaranteed death benefits, so it really just comes down to personal circumstances.
For more advice on which policy to choose, call (405) 340-1717 or fill out a contact form today.
Term Life Insurance
Term life policies are clearly defined, and thus easier for DIY insurance planning. A definite payment amount guarantees that a specified amount will be paid to the beneficiaries. These policies typically have a 20-to-30-year term with affordable premiums. Some companies include predetermined increases in payments at specific intervals throughout the life of the policy. Once the term of the policy is exhausted, a renewal is required, and the costs increase substantially due to age and physical conditions.
Whole Life Insurance
Whole life insurance policies can be difficult to understand at first because there are actually two components: death benefits and a savings account. When the policy is first purchased, a death benefit amount is selected—the same as for a term policy. However, as the premiums are paid, the money is put in a savings account. This account accrues interest paid by the insurance company. As the amount of money in the savings account increases, the death benefit decreases, so that the total amount of money associated with the policy remains constant. Eventually, the total amount of money that will be paid out to the beneficiaries is the purchaser's own money plus the interest. So while premiums are higher for whole life insurance than term life insurance, the money is guaranteed for the whole lifespan, plus at least the minimum amount of interest the company gives per year. Depending on the success and qualifications of the company that provides the insurance, the policy purchaser may receive higher or lower dividends. Well-established companies usually give the best returns on investments.
Insurance planning emboldens people to consider all the factors that affect the actual return on premium investment. For those able to pay higher premiums now, a whole life insurance policy may be worth the investment. The best advice is to request a quote for comparable plans. Both term and whole life policies offer tax-free income benefits and guaranteed death benefits, so it really just comes down to personal circumstances.
For more advice on which policy to choose, call (405) 340-1717 or fill out a contact form today.
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